One year after PG&E bankruptcy, spending of the Fire Victim Trust remains a mystery

It has been a year since Pacific Gas and Electric Company left Chapter 11 bankruptcy protection. This exit deal included a pledged $ 13.5 billion settlement to pay victims of forest fires caused by the equipment. of the company.

The deal was a milestone for survivors of the fires, Bill Smith, Acting CEO of PG&E declared July 1, 2020. “Today’s announcement is important to PG&E and to the many wildfire victims who are now on the verge of being paid,” he said. “Compensating these victims fairly and expeditiously has been our primary focus throughout this process, and I am happy to say that today we have funded the Fire Victim Trust for their benefit. “

But a year later, public records show that a Fire Victim Trust set up to distribute the settlement has been slow to pay victims – and rack up big bills for lawyers and consultants.

In May, the Californian newsroom of KQED and NPR published a survey in expenses by the Fire Victim Trust responsible for compensating survivors. We found that in its first year, the trust billed $ 51 million in overhead and distributed only $ 7 million to fire victims. Ninety percent of outgoing funds paid lawyers and consultants in 2020 while the vast majority of fire victims awaited help.

The pace of payments has accelerated this year, but June 30th, less than 3% of fire victims – 1,867 out of around 70,000 in total – had their claims fully processed. For now, they receive 30% of what was owed to them while the Fire Victim Trust collects all of its fees. Compensation of approximately $ 436 million was paid.

But there is still a lot that we don’t know.

To date, the Trust has refused to share its budget, a quarterly expense breakdown, or a detailed report of the companies and individuals the Trust has paid.

The Trust also refuses to make public other details we have requested, such as the terms of its custody contract with the attorneys. sue former directors and officers of PG&E on behalf of the Trust. The lawyer who led this lawsuit, Frank Pitre, sits on the court-appointed trust oversight committee of the Fire Victim Trust, as do representatives of three other law firms involved. KQED has been asking to review the Trust’s retention agreement with these lawyers since February.

Leading experts have told us that the level of secrecy surrounding the Trust is unusual. “One of the hallmarks of the bankruptcy process is transparency,” Scott McNutt, a former member of the board of governors of the State Bar of California and a veteran bankruptcy lawyer, told KQED in May. “One of the hallmarks of the administration of trusts is transparency. That is why they are called trusts.”

After our May investigation was released, a bipartisan group of state lawmakers called on California Attorney General Rob Bonta to investigate the expenses and administration of the PG&E Fire Victim Trust.

“It’s outrageous,” lawmakers wrote to Bonta, “especially in light of the fact that thousands of fire victims are struggling to rebuild their lives.”

Bonta’s office said it was unable to comment, even to confirm or deny, a potential or ongoing investigation.

The trust says our reports are “inaccurate and uninformed”. They are wrong.

After lawmakers called for an investigation, the Fire Victim Trust and the Trust Oversight Committee, made up primarily of civil liability attorneys, wrote to the attorney general and challenged our reports.

The Fire Victim Trust is run by retired California Court of Appeals Judge John Trotter, who KQED has revealed is charging $ 1,500 an hour. In one video published in response to our story, he said he had reduced his pay to a “very adequate” salary of $ 150,000 per month.

In his letter to the Attorney General, Trotter said he was “appalled at the negligence with which he [the legislators’ letter] was written. “Without naming KQED or NPR’s California newsroom, Trotter continued,” He appears to be influenced by recent, inaccurate and misinformed reporting, without any attempt to understand the workings or function of the Trust. ”

In his letter, the Trust Oversight Committee said the figures reported by KQED were “out of date or … out of context.”

Both statements couldn’t be further from the truth, as the long trail of emails between KQED and the Fire Victim Trust clearly shows. We have gone to great lengths to understand the operations and function of the Trust, and have systematically presented our findings to them – through their spokespersons – so that they have the opportunity to comment and explain.

Despite their public attacks on our journalism, we have yet to see any legitimate examples of inaccuracies in our reporting on the finances of the Trust.

As noted below, we have done our best to provide this accounting with the limited information contained in the public records. We welcome any additional transparency on the part of the Trust in its spending and administration.

Claim by the trustee:

No attempt has been made to understand the operation or function of the Trust.

Response from KQED:

We have made every effort to familiarize ourselves with the internal workings of the Trust. We combed through bankruptcy court files, hearing transcripts and correspondence from the Fire Victims Trust.

We had dozens of email and phone contacts with the Trust’s public relations firm, asking detailed questions about our findings. We have also asked several times to interview the Trustee, John Trotter, and the Trust’s Claims Administrator since our last interview with the two in November.

We also contacted the seven companies that we identified as having been paid by the Trust. Only one responded to our request. None responded to questions about the amount of money they had received.

Again, we would like more transparency on how the Trust does its job and spends its money.

Claim of the supervisory committee of the trust:

To claim that the Trust spent almost 90% of the funds on overhead in the first year is “false and misleading as stated.” Ninety percent of the Trust’s funds would exceed $ 10 billion.

Response from KQED:

KQED was clear from the first published article on the finances of the Trust that overhead represented almost 90% of funds spent in its first year. We never suggested that the Trust spent $ 10 billion – or anything close to that amount – on overhead.

Claim of the supervisory committee of the trust:

The statement that the Fire Victim Trust racked up over $ 51 million in overhead but allocated only $ 7 million to survivors of the fires is “based on year-end 2020 data, which is now as of five months, although the Trust released more recent data regarding survivor payments, which showed a much different picture.

Response from KQED:

This 2020 year-end overhead data is the only information the Trust chose to share in its annual report, which was released four months after the end of its chosen reporting period. Since then, the Trust has continued to incur overhead costs without releasing updated figures to the public. However, the Trust has regularly published updated information on payments to fire survivors, and KQED has used the most recent figures in all of our reports. We see that the Fire Victim Trust has started releasing this information publicly. to his website since we published our survey.

In his recent letter in response to state legislators, the trust watchdog decided to provide the information we were looking for before our story. Operating expenses through April of this year – pending an April expense audit – now exceed $ 84.5 million.

Claim of the supervisory committee of the trust:

“A lot of people worked between January 1, 2020 and July 1, 2020 to launch the Trust, but until July 1, it had no funds except for a $ 15 million advance made. by PG&E in April 2020 to cover expenses incurred from January 1. before.”

Response from KQED:

We’re clear in our story – and in fact, we were the first to report – about this “lead,” which amounts to millions of dollars paid for start-up costs during the first half of the year. last year, which the Trust left out Annual report 2020. Most of PG&E’s advance was eventually credited back to the company, with fire victims paying the rest of the bill. It’s still unclear why these costs weren’t included in the Fire Victim Trust’s annual report, despite KQED’s efforts to get answers before our first article was published. By our calculations, the Trust spent at least $ 12.7 million in the first half of last year. The Fiducie refuses to engage with us to confirm this calculation. PG&E has confirmed this to us.

Claim of the supervisory committee of the trust:

The Trust needed a strong staff to develop a process for resolving complaints and eradicating fraud.

Response from KQED:

This and other explanation for the initial slow payment has been made clear in all of our stories. Despite the Fire Victim Trust’s decision to limit transparency, we have tried to be fair and include voices explaining why the process takes time, even when the Trust would not provide that voice itself.

We note that an important reason for the delay stems from the fact that a significant portion of the compensation for fire victims came in the form of actions in PG&E itself. This rare result was actively supported by most of the members of the Trust Oversight Committee last year, as we reported then. More importantly, the fire victims themselves have voiced these concerns as we have reported. here and here. Today, the tiny fraction of fire victims who have had their claims processed and paid for now only receive 30% of their claim. In the words of the trustee himself: “We don’t know how much money we have because a substantial portion of the assets that are going to be used to pay you are in the form of Pacific Gas and Electric common stock.”

Every dollar spent on overhead is a dollar that is not distributed to fire victims who need it. No one expects the Trust to perform the complicated task of distributing billions of dollars equitably without incurring expense. But the Fire Victim Trust has not been transparent about these costs. Fire survivors want and deserve a timely, honest and clear explanation of where their settlement money is going, if not to them.

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